Emerging market bonds: don’t fear rate rises just yet – Californianewstimes.com

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According to, economists around the world are suffering from rising interest rates Financial Times poll.. But if emerging market fixed income investors are concerned, they continue to hide it well. Yields on developed sovereigns have risen this year, but emerging market debt yields have not followed suit. Spreads are strong. This suggests either complacency or sustained optimism for sovereign and corporate debt issued by developing countries. Given the long-standing investor thirst for yields, the latter seems likely.

One sign of sustained demand for EM debt can be seen in this week’s huge $ 10 billion offer from Qatar Oil. This is the first time in 15 years. According to Dealogic data, this will be the third largest EM bond transaction in the last five years. Qatar Oil, a large producer of liquefied natural gas, is being driven by rising hydrocarbon prices. This has now doubled the credit rating by A-minus, according to S & P.

With sound EM yields everywhere, buyers are looking for more profit. Witness the steadily growing money flowing into this sector. According to Morgan Stanley, the inflow has been strong since the beginning of the year, the highest on a comparative basis since 2017. Within global credit, the funds transferred to EM Hard Currency Bond Funds will follow the funds of US investment-eligible funds over the past few years. Local currency debt flows have also recovered.

That demand explains why EM yield spreads remain relatively low. Spreads for both sovereign and corporate issuers have fallen to their lowest levels in three years. However, emerging market debt has become a very widespread church in the last decade. Some areas are suffering from the Covid-19 epidemic.Concerns about Latin America It is offset by advances in the virus in Asia. Until very recently, there were few cases of pandemics in sub-Saharan Africa. EM investor Gemcorp believes that Angola’s economic and political reforms have made the 2025 9.5% coupon government bond an attractive proposal.

Fixed income investors continue to want higher yields. Concerns over rising interest rates in advanced economies have yet to drive them out of higher coupon EM bonds.

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Emerging market bonds: don’t fear rate rises just yet Source link Emerging market bonds: don’t fear rate rises just yet